The City of Buffalo’s new fiscal year began on July 1 and already it has sprung a couple leaks. The state Legislature took no action on the proposed hotel occupancy tax, which was anticipated to bring in $4.2 million before June 30, 2025. The Buffalo Common Council killed a proposal to increase parking rates in the city which was projected to produce an additional $2 million in revenue. These are the first of what will likely be several shortfalls in revenue or under estimations in certain spending categories.
The Council is looking at revisions to the city’s budget approval process which will give the Council more time to review and revise proposed budgets from the mayor. If enacted that will help a bit. But process is not money and the city needs a ton of money. The next budget will start with a hole of more than $40 million created by this year’s use of one-time revenues. The above-mentioned negative actions on revenue will add another $6 million to that gap. Then, if the city administration chooses to use additional federal pandemic-related one-time revenues to fill the 2024-2025 hole, the problem will only grow the following year.
Aside from wanting a larger share of the county sales tax revenues and additional state funding there have been no real solutions offered to the impending financial crisis. The Buffalo Fiscal Stability Authority has thus far offered no recommendations to improve the city’s “Fiscal Stability.” While all this nothingness is going on, there have been some suggestions made by citizens who take an interest in seeing the city financially healthy and therefore best able to serve residents, businesses, and public institutions. We’re talking about thinking out-of-the-box.
Citizen action
Our City Action Buffalo describes itself as “a broad coalition of Buffalo residents who have come together to disrupt the political status quo in our city through movement and people-centered politics and co-governance structures. We work to change systems and to shape policies to ensure racial, social, and economic justice for all Buffalonians.”
In June the organization published a well-researched and well written report on city taxing procedures, The rich don’t pay but you do: the city’s free rides for the report analyzes certain aspects of the city’s property tax revenues in great detail.
Among the findings:
- “Payments by top taxpayers have significantly decreased,” citing a utility and bank in particular. Estimated annual tax lost: $350,000
- “Payments by wealthy homeowners [defined as owners of property assessed at $400,000 or more] have significantly decreased.” The decreases are attributed to successful challenges to assessments, which the report suggests are most common among wealthy property owners. Estimated annual tax lost: $300,000-400,000
- “Major landlords and wealthy homeowners have successfully challenged their assessments, lowering their tax bills significantly.
- Real estate developers receive significant tax breaks from the city. Ten major developers “are paying about $6 million per year less in taxes than they would without [tax exemption] programs.” That amount is mitigated to a degree by PILOTs (Payments in lieu of taxes).
The report recommends:
- “A full and transparent inquiry into the above [raised issues], as well as the overall distribution of the city’s property tax burden, needs to be conducted, especially in advance of the city’s reassessment process…
- “The city should consider implementing a progressive property tax structure. This can be done through higher rates on high-value properties, exemptions for lower-value owner-occupied properties, and other mechanisms…
- The city should discontinue future subsidies for any real estate development project which does not work to address the city’s housing crisis, and which further exacerbates the city’s commercial real estate crisis…
- “The city should end the use of PILOTS to lower the tax rates for real estate developers, as they unfairly and undemocratically privatize the control of city funds.
- “The city should ensure an open and accessible process through which city residents can participate in improving the fairness of assessments…
- “The city should report annually on the specific measures it has taken to ensure the tax burden is distributed equitably across income levels, and that the wealthiest pay their fair share.”
Mayor Byron Brown, in an interview about this report published in the Buffalo News, noted that the recommended changes in policy concerning programs such as PILOTs and tax exemptions could only be achieved through state legislation. Variable property tax rates dependent upon a property’s value might also require state action.
Some other ideas
Some city leaders who have been thinking about how the city’s financial crisis might be managed have been discussing a few other ideas. These ideas are lacking in dollar details, which in some cases might be difficult or even impossible to gather. Nonetheless, here are some other suggestions:
- Approximately 32 percent of property in the city is tax exempt in one form or another. That mostly includes government offices, schools, and public organizations. The suggestion on the table is that these properties should be assessed a special tax that is equal to the salary of the organization’s CEO. The theory is that if the organization can afford to pay the CEO’s salary (pick-a-number, say $500,000) then they should also be able to pay the special assessment. In cases of government properties, the state or federal government should pay the required amount.
- A three percent tax should be added to any hospital bills of patients from outside of New York State who are being treated in hospitals in Buffalo. (Aside from the anticipated opposition to such a plan, it may not be possible to gather information about what such a suggestion is worth.)
- Seek expert advice about what revenue opportunities or potential savings in city programs might be produced by retaining a national firm like McKinsey to assist with such analysis.
Most of the suggestions listed above would likely contribute a few million dollars at best to resolving Buffalo’s fiscal problems, while the magnitude of the problem is in the tens of millions of dollars. More thinking “out-of-the-box” will be needed.
Apropos of anything?
A new documentary became available through Amazon ($2.99) last week which reviews the difficulties of a rust belt city in deep financial distress. The city lost more than one-half its population between 1950 and today; has a large part of its population living in poverty; has substantial vacant property scattered throughout the city; and had dug itself into significant debt. Solutions enacted included transferring a major city-owned asset, the art museum, to a private organization funded by major foundations and private donors, with the proceeds forwarded to the city government to reduce its debt; and having city retirees voluntarily reduce their pension and medical insurance coverage. The name of the documentary is “Gradually Then Suddenly: The Bankruptcy of Detroit.”
Henry Nowak
Former Congressman Henry Nowak passed away this past Sunday at the age of 89. I knew him from the time when he was the Erie County Comptroller in the 1970s, which was followed by his 18 years in Congress.
Henry was a quiet and respectful gentleman who worked very hard for his community. He was not into self-promotion. He delivered hundreds of millions of dollars to the Buffalo community on projects that continue to be valued to this day. He did his job very well. Rest in peace, Henry.
X/Twitter @kenkruly
Threads kenkruly